Is the Russian-South African Nuclear Deal at the Heart of the Zuma’s Political Crisis?

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Allister Sparks made some interesting observations in BusinessDay last week:

Last week, all four of SA’s big banks closed Oakbay’s accounts, KPMG announced it would no longer audit the company’s books, and the family’s stock exchange sponsor abandoned them.

This was followed by Atul and Varun Gupta resigning their directorships of Oakbay, and Duduzane Zuma, the president’s son, from his nonexecutive chairmanship of Shiva Uranium, an Oakbay subsidiary.

 

There is something fishy going on here. The critical thing is that Oakbay, and particularly Shiva, a uranium mine in the North West, is central to Zuma’s eagerness to do a deal with Russia to build and operate a series of nuclear plants capable of providing Eskom with 9,600MW of electricity.

 

It is a deal that would make both the Guptas and the Zuma family a fortune, since Duduzane Zuma owns a sizeable slice of Shiva’s shares.

 

But it is a deal two finance ministers, Pravin Gordhan and Nhlanhla Nene, have blocked because they deemed it unaffordable.

Sparks goes on to allege that it was Nene’s resistance to the nuclear deal prompted his sacking, directly contributing to South Africa’s current political crisis.

It is interesting to note that a few hours before firing Nene on that critical night, Zuma had persuaded the Cabinet to approve the 9,600MW deal — in itself an illustration of how he has packed his administration with toadies. He must have been furious when Nene refused to okay it, thus obstructing his grand plan.

I have always thought that investing in nuclear power was the worst idea ever for South Africa’s power sector. There is not a single nuclear power plant in the world that has ever been cost effective. Adjusted for government incentives, research and development and waste disposal, nuclear is way more expensive than large-scale solar or wind power, not to speak of hydro, all of which have substantial potential in South Africa and the wider region.

Is now the time for Vesuvius of Zupta scandals to erupt? via Martin Plaut

Trevor Noah on the Nkandla Scandal

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Podcast: On South Africa’s doom and gloom

In this podcast, we are joined by Martin Plaut and Gushwell Brooks to discuss the deplorable state of South African politics.

 

South African Defence Review passes from committee to National Assembly

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The adoption takes the (defence) policy a step further towards adoption by Parliament and is a major milestone in ensuring the revitalisation of the country’s armed forces.

I have written about the Defence Review (essentially a whitepaper on the future of South Africa’s military) several times in the past. South Africa’s National Defence Force really is in a dire state and not at all equipped for the missions it is currently expected to fulfill. Like being part of the U.N.’s Force Intervention Brigade in the DR Congo.

To the best of my knowledge this is not disputed by anybody in South African politics. What I’m missing from the debate around the Defence Review so far is a discussion about how South Africa wants to use its military in the future. The Defence Review gives several possible scenarios but these cover only the operational capabilities of the SANDF. So far, South Africa’s government has not formulated a convincing military doctrine, e.g. under which circumstances it will be prepared to deploy the military inside or outside its borders.

Source: Defence Review given the thumbs up by Parliamentary review committee | defenceWeb

Rich Links: Gas Revenues in Tanzania

  • “With the gas industry expected to be the largest player in Tanzania’s economy, the Tanzanian government could face substantial losses if they do not act to curb bad policies and practices.  Here are three major issues Tanzania needs to tackle in order to ensure they capitalize on upcoming gas revenues:”

  • “Mining prospectors will be able to apply for licences online and get feedback within 90 days, according to new amendments to the Mining Bill.”

  • “By the evidence of South Sudan’s budget, presented to parliament in late June, the country’s finance ministry has lost its mind.”

  • The Norwegian Ambassador to Ghana, Mrs. Hege Hertzberg, has urged the Ghana government to use the oil resource to transform the country’s economy from import dependent, to become a leading exporter on the African continent.

  • “Built by a consortium led by British company Globeleq, the 138 megawatt (MW) wind farm is one of Africa’s biggest – larger than the 120 MW Ashegoda windfarm that was unveiled by Ethiopia in October 2013, though not as big as the Tarfaya wind farm in south-western Morocco, which started producing energy in April and will eventually generate up to 300 MW of electricity.”

  • “Some neighbouring countries are less upbeat about the project. Citing two treaties, dating from 1929 and 1959, Egypt claims a historic right over the Nile. It fears that the dam will restrict the flow of water. […] “These treaties are now obsolete. We are entitled to build the dam,” says Alemayehu Tegenu, Ethiopia’s minister of water, energy and irrigation. “For a long time we derived no benefit from our river.”

  • “Unfortunately, Tullow could not repeat its African success story in Ethiopia. […] Sources told The Reporter that executives of Tullow decided to suspend drilling operation in Ethiopia. “They will pull out their drilling crew out of Ethiopia. They will take out their core staff to other projects in other countries and lay off the rest of the staff in their Ethiopia office.”

  • “Zimbabwe’s cotton industry will remain under pressure as international lint prices continue to wane with China’s imports expected to decline in the 2014/2015 season as the Asian nation shifts to domestic cotton for national reserves.”

  • “The duration of license now depends on the size and nature of mineral deposits, as well as the size of investment to be injected in a concession. This will be shown through a feasibility study conducted by the investor.”

African Development Bank pushes for shale gas development

A report (pdf) launched by the African development bank finds substantial potential for natural gas extraction from shale formations in a number of African countries:

Several African countries have potentially viable shale gas deposits, which, if developed, could lead to lower gas prices, increased consumption of natural gas, reduced greenhouse gas emissions from power generation and substantial economic benefits to producer countries, finds a report launched today by the African Development Bank (AfDB). – Press release

But the report also cautions the countries analysed, including Algeria, Libya, Tunisia, Morocco, Mauritania, South Africa and the Western Sahara that shale gas exploitation is fraught with environmental dangers. From the executive summary:

The production of shale gas by fracking involves a number of environmental risks, and these continue to be of concern to communities near proposed well sites and groups involved with environmental protection. Four key issues have been identified that governments need to take into account in their decision making and regulations for the sector.
I. The large use of water required for fracking – Each well requires a large amount f water (several thousands of cubic meters, which has to be either taken from local water sources or trucked in. […]
II. Water contamination – The chemicals added to the fracturing fluid may escape and pollute water supplies. This can happen at the surface, where better containment can be mandated, or underground through leaks into aquifers, […]

With all of the countries assessed in the report being largely arid (South Africa’s largest shale gas potential is in the Karoo desert) and already confronted with water crises, this is a major issue.

III. Seismic events […]
IV. Venting and flaring of gas – […] The global warming potential of vented gas is so high that allowing a substantial fraction of the produced gas to be vented would raise the total life-cycle emissions of the gas toward those of coal, […]
The AfDB advises prospective producers to use available regulatory tools to minimize environmental risks. Environmental organisations argue that until now the potential environmental harm that shale gas exploitation could cause is not understood very well and that countries should refrain from tapping their reserves of this unconventional resource because of this. But with the report attesting several African countries potential reserves on “game-changer” scale, appetites will likely overcome caution.

What is your take on the report? What weights greater – environmental concerns or potential profits?

Rich Links: Copper in Zambia, Gold in Darfur and more

As always, the best reads from around the ‘net:

Zambian copper project results in many disputes

An excellent article looks at the many controversies surrounding the Sentinel copper project in Zambia. Owner First Quantum Minerals is embroiled in land disputes, competing interpretation of mining and compensation law, as well as a governmental approach swaying between support and condemnation. Think Africa Press

A rare look at illegal oil refineries in Nigeria

The British Guardian provides insights into illegal refineries in the Niger Delta, where stolen crude oil is converted into Diesel under incredibly dangerous conditions for workers, communities and environment (including video). The Guardian

Detailed look at the future of East African oil

Many issues and challenges mentioned in this piece will sound familiar to observers of the East African oil business, but the article offers a nice and in-depth summary. Voice of America

Angola ends tax exemption of oil companies

The government has gazetted a law that applies consumption tax rates ranging from 5 to 10 per cent on activities of companies working in the oil sector. These were so far completely exempt from the tax that reaches rates of up to 30 per cent on luxury goods. This is Africa | Mining Review

Gold and violence in Darfur

A look at how government-supported gold mining activities contribute to increasing violence and a change of conflict dynamics in Darfur. The Guardian

Other stuff

  • Study forecasts continuing stagnation of the South African mining sector: African Mining Brief
  • The European Parliament has accepted a new Fishery treaty with Mauritania: Jeune Afrique
  • Uganda is looking to import Coal from Mozambique to develop local iron ore reserves: AllAfrica/New Vision
  • The European Union has lifted sanctions against Zimbabwe, allowing for diamond exports from its controversial Marange mine to resume: Mining Review
  • Thousands of people demonstrated against French mining giant Areva in the town of Arli, Niger: Jeune Afrique
  • Mozambique plans to finish its new natural gas legislation at the end of this year: Mining Review
  • Namibia plans to start exporting large quantities of cattle on the hoof to neighbour Angola: AllAfrica/New Era

Rich Links: Natural Gas in Tanzania, Nuclear Power in South Africa and More

As always, the best links from around the internet:

New policy on natural gas coming soon in Tanzania

The government of Tanzania is on the verge of passing a new national policy on natural gas exploitation. So far the country has no specific official policy in that sector and the new legislation wants to address specifically the issue of local content. AllAfrica/Tanzania Daily News (2)

South Africa aims for new nuclear power plants

The South African government pushes for the construction of new nuclear power plants to increase the generation of nuclear energy from 1,800 MW to 9,600 MW per year by 2030. Key financial decisions are planned to be taken this financial year. South Africa currently runs the only active nuclear power plant on the African continent and pursues a large nuclear capacity under the label of “clean” and indigenous energy. AllAfrica/SouthAfrica.info

Resources in the DR Congo

A detailed look at the trends and challenges of the natural resources sector in the Democratic Republic of the Congo. Ventures Africa

The dangers of the use mercury in gold mining

Mercury is used by the great majority of artisanal gold miners in Africa, numbering millions, but its use results in dramatic health problems. A new international treaty aims to reduce the amount of mercury used, but changing entrenched practices in local communities will be hard. The Economist

Search for oil kills whales off Madagascar

A sonar system, operated by Exxon Mobile to explore oil fields off the Madagascan coast, is the reason for the death of dozens of melon-headed whales. This is the finding of an independent scientific commission. Global Post

Three alternatives for South Sudanese oil

The governments of South Sudan and Kenya are currently planning the establishment of a new pipeline corridor to transfer Sudanese oil to the Indian Sea at Lamu. This article argues that the better alternatives would be to transfer the oil by either rail or road. AllAfrica/Pambazuka News

High hopes for Rwandan mining sector

The Rwandan government wants the country’s mining exports to triple by 2017. AllAfrica/Rwanda Focus

Rich Links: Oil Theft in Nigeria, Mining Law in South Africa, EITI and More

Trading concessions with “governments in exile”

Kilimanjaro Capital, a company registered in Belize, is trying to get investors interested in buying shares of oil and gas concessions bought from African governments in exile. These include self-styled authorities from Cabinda (Angola), Biafra (Nigeria) and southern Cameroon. Sufficient to say that the odds of a positive return on these investments are terribly long. Africa Confidential (subscription required)

Chatham House releases report on crude oil theft in Nigeria

A new Africa Programme report examines the international dimensions of Nigerian crude oil theft and explores what the international community could do to tackle the problem. The report assesses the scale of crude oil theft in Nigeria, analyses how stolen crude is exported and highlights the laundering of proceeds through global financial centres.

Chatham House (there is also a video with a discussion of the report available)

The problems of EITI

The blog Why Nations Fail devotes several blog posts to the Extractive Industries Transparency Initiative (EITI) and discusses its shortcomings and opportunities. Post 1, Post 2, Post 3

Liberian government revokes logging permits

17 logging permits for valuable timber were revoked by the Liberian government. These permits have been given out in contradiction with the 2006 law governing these issues, according to the government. AllAfrica

South African mining law draws criticism

The South African government opened the public review process for a proposed mining law that would bring considerable reform to the sector. Especially the private sector has lost no time criticising the law, which in their view would dramatically worsen the investment climate. Parts of the law would give the government the ability to declare certain resources as “strategic”, forcing producers to sell them to local businesses at potentially below market prices to allow to develop local industries. The government has shown willingness to revisit some aspects of the law. This is Africa | African Arguments

Nigerian companies strengthen their oil production

The share of total oil production provided by local companies is rising in Nigeria. International companies like Shell are divesting from onshore and shallow water wells and concentrate on deep water blocks, where political and security risks are lower. Mining Review

Rich Links: Strikes, Child Labour and Groundwater

Regularly, we bring you the best links from around the internet on everything from exciting new resource discoveries to strikes and market developments. Most pieces we link to will include a look at the political angle of the raw news:

Looming strikes in South African gold mines:

The Union ACMU rejects a settlement between two other unions and gold mining companies, demanding better terms for its members. Employers on the other hand claim that any further strikes would be illegal and unprotected. The stage seems to be set for a confrontation: MiningReview.com

Child labor in Tanzanian gold mines:

Child labour is still common in Tanzanian mines, reports ThinkAfricaPress

Vast groundwater reserves discovered in Kenya’s Turkana region

Politicians are euphoric, but the remoteness of the reserves and their depth (300 meters) make it unlikely that talk of a “game changer” comes true. More likely are profound positive local consequences: Daily Maverick